Payments under problem charters – the continuing effectiveness of the lien

David PitlargeDavid Pitlarge

PartnerPartnerMarine, Trade and EnergyMarine, Trade and Energy

1. Introduction: continuing relevance

• What you might achieve• Alternative rights to recovery

– Rule B– Freezing orders– Payment orders– Possessory Liens/Cargo

2. Introduction: Where to find it

• NYPE 1946 – Clause 18: “The Owners shall have a lien upon…all sub-freights for any amounts due under this charter”…

• Other “sub-freight” clauses:– Baltime 1939 – Clause 17

– Gastime – Clause 24

– Linertime - Clause 20

– Intertanktime 80- clause 27

– Barecon ’89 ( but not 2001, which includes sub hire and b/l freight)

2. Introduction: Where to find it cont’d

• Wider terms/sub-hires:

– NYPE 1993 – Clause 23

– Boxtime 2004 – Clause 15 (B)

– BPtime 3 – Clause 14

– Gentime – Clause 14(D)

• Offshore/ salvage: Supplytime – Clause 19 (“lien on all cargoes and

equipment”) – Wreckhire 2010 / Wreckstage 2010

3. Nature of the Lien

• Not a lien as such– Not possessory– Contracts: cargo, – General law: Freight, GA, unpaid seller, shares

• Distinct from maritime lien• Equitable assignment and the rival theories: “the Western

Moscow” – (Western Bulk Shipowning III A/S v Carbofer Maritime Trading APS and Others [2012] EWHC (Comm).

4. What it covers/wording

• “Sub-freights”…does not include sub hire …

• “The Cebu No.1” – Cave Shipping Corporation v Latin American Shipping Corporation [1983] 1 Lloyd’s Rep. 302

• “The Cebu No. 2” – Itex Itagrain Export S.A. v Cave Shipping Corporation and Others [1990] 2 Lloyd’s Rep. 316

• “The Bulk Chile” – Dry Bulk Handy Holding Inc and Another v Fayette International Holdings Ltd and Another [2012] EWHC 2107 (Comm)

5. What it covers:The “Bulk Chile”

chain: tc DBHH/ CSAV; tc CSAV/KLC; tct KLC/Fayette; vc Fayette /Metinvest….owners’ bill, Metinvest as shippers

• KLC fail to pay – rehabilitation in Korea , recognised subsequently under Cross Border Insolvency Regulations

• Notice served on Fayette and Metinvest; Metinvest pay freight to Fayette

• “Owners” could recover: b/l freight, v/c freight (even though not payable as of notice date)…and for post withdrawal service

5. What it covers:

• So we can look at…• Sub freight, perhaps hire• Sub , sub freight ( and, if provided for , sub, sub hire)• “Assignments of assignments”: charterers’ and sub

charterers’ rights to receive• Bill of lading freight ( free-standing right , see The Spiros

C” [2000] 2 Lloyd’s Rep 319, “The Bulk Chile”) ….BUT this is technically a different right and a function of the owner’s contract with the shipper.

6. Execution and Priorities

•Notice requirements per the “Bulk Chile”:

1.-owners assignees of debts owed/ to be owed

2.- what debts assigned

3.- an amount due under head charter- an amount; not how much…no breakdown required

4.-owner requires payment of assigned debt directly •Effective on service•Priorities

7. Risks, Challenges and Disputes

(A) The Risk:

• Double jeopardy• “Attika Hope” -[1988] 1 Lloyd's Rep. 439

8. Risks, challenges and Disputes

(B) Challenges

• The language of the clause• Registration: “The Ugland Trailer” – Re Welsh Irish Ferries Ltd

(in Receivership and in Liquidation) [1985] 2 Lloyd’s Rep. 372• “The Anangel Glory [1988] 1 Lloyd’s Rep. 45• Companies Act 2006 s. 860 ( replacing s.395 CA 1985)

9. Risks, Challenges and Disputes

(C) Disputes:• Forum for determination of the lien rights• Forum for the assigned claim (see the “Western

Moscow”)• The impact of foreign insolvencies - Cosco Bulk

Carrier Co. Ltd v Armada Shipping SA and another Re Armada Shipping SA [2011] EWHC 216 (Ch)) :- Cosco/ Armada/ STX- Armada in liquidation in Switzerland; lien issues to be determined in London arbitration as per c/p

10. Summary and Practical Tips

• Drafting – as wide as possible– BIMCO Lien clause:

– In addition to c/p lien clause

– Any sums due under any sub charterperties (in addition to freights and sub freights)

– Lien on bunkers

– Vesting of property in bunkers on withdrawal.

• Consider registration issues at the outset

10. Summary and Practical Tips

• Timely service of effective notices• Notice to the proper parties• Consider deductions• Forum for disputes• Pragmatic solutions and escrow

For further information please contact:

David Pitlarge - Partner Hill Dickinson

Direct Dial +44 (0)20 7280 9251Email david.pitlarge@hilldickinson.com

Fax +44 (0)20 7283 1144

Website www.hilldickinson.com